HST limbo creates uncertainty in construction industry for 2012

Builders lobby government but change still a long ways on horizon

Tax limbo Local builder Bob Deeks, pictured here at the Rainbow subdivision in 2010, is concerned about the impact of the HST on the residential building industry.

The 2012 construction season could break the backs of some local building companies in Whistler.

The second biggest industry in the resort is in a holding pattern as the death knell sounds out on the Harmonized Sales Tax (HST).

Clients are abandoning deals and hesitation from others is creating a tenuous building environment for the year ahead as people ask themselves: will it be cheaper to build if we wait for 18 months until the HST is wiped out for good?

"I think for some businesses, 2012 will be a make or break year," said Bob Deeks, owner of well-established RDC Fine Homes. "And I believe that we've already seen that in 2011."

It's a critical issue, he added, not just in Whistler but also across the province, primarily affecting the residential home building sector.

"We have been after the government to do something about this," said Deeks. "They have been unwilling, unable, to address this issue but it is crippling the residential construction industry."

One of his clients, for example, walked away from a million-dollar project this year, choosing instead to wait until the HST is gone.

"They specifically asked me regarding the additional costs that the HST would bring to their project and at one point said: 'well, why shouldn't we wait a year? We're going to save $50,000.' And it's a hard thing to come back from," said Deeks.

"So I do think it has affected us in the corridor. My interpretation is that business has been slow through 2011 and, as I talk to the industry, the outlook is not great for 2012. Certainly, through my contacts throughout the province, a lot of people are laying blame to the slowdown due to the HST."

That's one place Melissa McKay, a local structural engineer, is laying the blame.

Sure, she said, there's the expected post-Olympic slump and the slump of the U.S. economy that has had spin-off effects in Whistler. But the HST uncertainty is not helping matters. She's seeing the effects first hand.

"This HST will make people apprehensive about moving forward with projects this year," she said. "...it is going to make the 2012 construction season severely challenging."

The issue is being felt across the province but there are unique challenges in Whistler.

For many, a Whistler home is a discretionary buying decision because it's a secondary home or recreational home. That means clients have the luxury of waiting, gambling that prices will stay where they are until the HST is removed. The tax also applies to new homes over the $525,000 rebate threshold and so the impact is felt in the higher-end market.

"If you were (making)... a discretionary buying decision, maybe a second or a recreational home, which is the case in Whistler, you might do some thinking about it," said Eric Martin, who is on the board of the Urban Development Institute (UDI), an organization made up of more than 550 of BC's leading developers, which is heavily lobbying government for clarity to the rules and help with the impacts on its housing industry.